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Green Procurement in Trade Policy

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Green Procurement in Trade Policy Green Procurement in Trade Policy Background report prepared by Jane Earley, LLC for The Commission for Environmental Cooperation The Commission for Environmental Cooperation (CEC) was established under the North American Agreement on Environmental Cooperation (NAAEC) to address environmental issues in North America from a continental perspective, with a particular focus on those arising in the context of liberalized trade. This publication was prepared for the Secretariat of the CEC. The views contained herein do not necessarily reflect the views of the CEC, or the governments of Canada, Mexico or the United States of America. Reproduction of this document in whole or in part and in any form for educational or nonprofit purposes may be made without special permission from the CEC Secretariat, provided acknowledgement of the source is made. The CEC would appreciate receiving a copy of any publication or material that uses this document as a source. Commission for Environmental Cooperation 393, rue St-Jacques Ouest, Bureau 200 Montréal (Québec) Canada H2Y 1N9 E-mail: [email protected] http://www.cec.org Green Procurement in Trade Policy Executive Summary As interest and consumer demand grows for “green” products, and as producers realize increased market share in food products and consumer goods, public procurement, covering all federal and sub-central purchasing of countries throughout the world, is becoming an increasingly important market force. Just one web service, the Recycling Data Network Information Services, lists a recycled-content products database of over 4,500 listings in 700 product classifications. The US government alone purchases more than $200 billion worth of products and services annually and provides an additional $240 billion to grantees that, in turn, buy products and services. Sub-central and local markets are equally valuable in aggregate terms. The environmentally preferable procurement market is also becoming increasingly sophisticated. This includes preferences based on product attributes—ranging from energy efficiency to the amount of air, soil, and water pollution generated while making the product and waste disposal, recycled content resource use, transportation and durability. Many of these attributes are process-, rather than product-based, and are evaluated by one or more of the many private-sector and government-sponsored programs that evaluate and certify products for their “green” characteristics. This report explores whether there are possible barriers to “green” procurement arising from the international agreements that discipline trade in goods and services: the Uruguay Round Agreements, the North American Free Trade Agreement (NAFTA) and the Free Trade Area of the Americas (FTAA), which is in the process of negotiation. It describes the important operational provisions of the World Trade Organization (WTO) Government Procurement Agreement (GPA) and the NAFTA Chapter 10 Agreement on Public Procurement, and explores the likely limits of the FTAA procurement agreement. It also describes the standards disciplines relevant to defining “green” products, and procurement policies and practices relating to food. The conclusion is that there are no serious barriers to “green” procurement in these agreements, although standards disciplines could be used in some circumstances to challenge standards pertaining to particularly controversial products, such as transgenic maize (corn). This would most likely happen, not in the context of procurement per se, but rather in situations where particular standards could be determined to effectively prevent or deny market access, whether they are the subject of procurement or not. This report also notes that standards equivalence will be a growing challenge as ecolabels proliferate and green buying programs become broader and more widely used. iii Green Procurement in Trade Policy Table of Contents Executive Summary...........................................................................................................iii Section 1: Introduction....................................................................................................... 1 Section 2: The International Agreements......................................................................... 1 2.1 Some background on public procurement ....................................................................... 1 2.2 Existing international instruments – The GPA, NAFTA and the FTAA......................... 2 2.2.1 The GPA...................................................................................................................... 2 2.2.2 NAFTA........................................................................................................................ 4 2.2.3 The FTAA ................................................................................................................... 4 2.3 Effect on “Green” Procurement of these Agreements ..................................................... 4 Section 3: Defining “Green” Products – The WTO and its Agreements ...................... 4 3.1 General obligations.......................................................................................................... 4 3.2 GPA or NON-GPA.......................................................................................................... 5 3.3 Product or process-related standards ............................................................................... 6 3.4 GATT and GPA Requirements........................................................................................ 6 3.4.1 Most-favored nation (MFN) treatment....................................................................... 6 3.4.2 National treatment ..................................................................................................... 6 3.4.3 Absence of quantitative restrictions/trade barriers.................................................... 6 3.4.4 GATT/WTO and GPA treatment of “like products” .................................................. 7 3.4.5 GPA technical specifications ..................................................................................... 7 3.4.6 NAFTA technical specifications................................................................................. 8 3.5.7 GATT and GPA exceptions ........................................................................................ 8 3.4.8 Transparency.............................................................................................................. 9 3.5 The Standards Disciplines ............................................................................................... 9 3.5.1 GPA treatment of standards....................................................................................... 9 3.5.2 SPS Standards disciplines ........................................................................................ 10 3.5.3 TBT standards disciplines ........................................................................................ 11 3.5.4 Transparency in the Standards Agreements............................................................. 12 3.5.5 Equivalence and Ecolabels ...................................................................................... 12 Section 4: Procuring “green” food products, and procurement from local sources .. 13 4.1 Procurement of food ...................................................................................................... 13 4.1.1 The CLOC program ................................................................................................. 14 4.2 US government purchase of organic coffee as a “green” product................................. 14 4.3 Procurement of non-transgenic corn.............................................................................. 15 4.4 Local procurement preferences as “green”.................................................................... 16 Appendix 1: WTO sardines case analysis......................................................................17 iv Green Procurement in Trade Policy Section 1: Introduction Since an Executive Order signed by President Clinton in 1997 mandated the use of “green procurement” in US government agencies, the emerging trade policy issues surrounding it have remained somewhat clouded, even as the United States and its hemispheric partners have embarked on an ambitious series of trade liberalization agreements, and as the number of “green” products and initiatives in the marketplace have increased tenfold. Parallel developments are underway globally, in Europe, Asia and Latin America. This report describes the existing international trade obligations affecting government procurement at federal and sub-central levels, analyzes proposed rules and the negotiating positions in the three major agreements affecting the Western Hemisphere that relate to green products, and describes the disciplines governing what defines a “green” product. It then analyzes procurement issues raised by local purchase requirements and two kinds of products (non-transgenic maize and organic coffee). Finally, the report concludes that the WTO’s Agreement on Government Procurement (GPA), while more extensive than its predecessor, is unlikely to pose a problem for “green” procurement. In fact, it could even provide a substantial advantage in GPA member countries for products that meet “green” criteria. However, in some cases WTO standards obligations may be as important as the procurement agreement for “green” procurement.
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